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Thursday, January 10, 2008

IOI bonds snapped up

IOI Resources (L) Bhd's (IOIR) US$600 million (about RM2 billion) bonds were snapped up barely 90 minutes after the book was opened for investors to bid.

IOIR is a wholly-owned subsidiary of plantation company IOI Corp Bhd.

Bond traders said IOIR and sole bookrunner Citigroup had their timing right in issuing the bonds, which they said were ready for the market as early as last month.

The issue was oversubscribed by five times, thanks to strong demand from global investors.

The IOIR bonds, exchangeable into IOI shares, were launched at an initial size of US$500 million (RM1.6 billion), but after attracting about US$3 billion (RM9.8 billion) worth of demand, the upsize option was exercised in full for a total deal size of US$600 million.

Traders said that close to 120 investors participated in the deal and the bookrunners managed to bring yield significantly lower than the three per cent for IOI's US$370 million (RM1.2 billion) debt paper issued in December 2006.

On the timing of the latest issue, traders said the bonds have been able to ride on current strong prices for crude palm oil.

According to the term sheet filed with Bursa Malaysia yesterday, IOI Corp said it will use proceeds from the bonds for capital expenditure, investments and acquisitions, as well as working capital and other general corporate purposes.

The bonds, guaranteed by IOI Corp, have a five-year maturity, but can be put back to the issuer in the third year.

The zero coupon bonds were issued at par.

The exchange price of the third exchangeable bonds was set at RM11, or a 30.18 per cent exchange premium over the closing price of IOI Corp's shares on Tuesday of RM8.45, while its yield to put/maturity was set at 1.25 per cent.

IOI Corp's share price has more than doubled since the previous exchangeable bond issue.

IOI Corp executive chairman Tan Sri Lee Shin Cheng was reported to have said that for the US$370 million issuance, there was still a balance of US$180 million (RM589 million) to be redeemed.

"Bondholders in our first two issues made money despite paying a 25 per cent premium. Existing IOI shareholders also continue to make money as the share price goes up," he said.

By New Straits Times (by Ooi Tee Ching)

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